Sound Financial Bancorp, Inc. Earns $1.1 Million For The Second Quarter Of 2013, Posting Its Fourteenth Consecutive Quarter Of Profitability

Deposits totaled $319.5 million at June 30, 2013, compared to $313.7 million at June 30, 2012, and $312.1 million at December 31, 2012. Borrowings from the FHLB of Seattle increased to $40.5 million at June 30, 2013, compared to $8.2 million at June 30, 2012 and $21.9 million at December 31, 2012.

The total cost of deposits decreased 7 basis points to 0.62% during the second quarter of 2013, from 0.69% during the second quarter of 2012, and decreased 2 basis points from 0.64% during the first quarter of 2013. The total cost of borrowings decreased 218 basis points to 0.59% during the second quarter of 2013, from 2.77% during the second quarter of 2012, and decreased 34 basis points from 0.93% during the first quarter of 2013.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Sound Financial Bancorp, Inc. believes that certain non-GAAP financial measures provide investors with information useful in understanding Umpqua's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

Management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Tangible common equity is calculated as total shareholders' equity less goodwill and other intangible assets, net (excluding mortgage servicing rights). Tangible assets are total assets less goodwill and other intangible assets, net (excluding mortgage servicing rights). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets.

Sound Financial Bancorp, Inc., a bank holding company established in August 2012, is the parent company of Sound Community Bank, established in 1953 and headquartered in Seattle, Washington with full-service branches in Seattle, Tacoma, Mountlake Terrace, Sequim and Port Angeles. Sound Community Bank is a Fannie Mae Approved Lender and Seller/Servicer with an additional Loan Production Office in Madison Park neighborhood of Seattle, Washington. For more information, please visit www.soundcb.com .

Forward Looking Statement Disclaimer

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains statements that are not historical or current fact and constitute forward-looking statements. In some cases, you can identify these statements by words such as "may", "might", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential", or "continue", the negative of these terms and other comparable terminology. Such forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business.

These statements are only predictions based on our current expectations and projections about future events, and there are or may be important factors that could cause our actual results for 2013 and beyond to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially, include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage, consumer and other loans, real estate values, competition, changes in accounting principles, policies or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

For the Quarter Ended:

Percent Change From:

CONSOLIDATED INCOME STATEMENTS

June 30,

March 31,

June 30,

March 31,

June 30,

(in $000's, unaudited)

2013

2013

2012

2013

2012

Interest income

$ 4,886

$ 4,636

$ 4,598

5.4%

6.3%

Interest expense

544

569

588

-4.4%

-7.5%

Net interest income before provision for loan losses

4,342

4,067

4,010

6.8%

8.3%

Provision for loan losses

450

250

1,100

80.0%

-59.1%

Net interest income after provision for loan losses

3,892

4,067

2,910

2.0%

33.7%

Noninterest income:

Service charges and fee income

551

598

513

-7.9%

19.8%

Increase in cash surrender value of life insurance

74

78

52

-5.1%

42.3%

Mortgage servicing income

184

127

21

44.9%

776.2%

Gain on sale of loans

310

447

308

-30.6%

0.6%

Other noninterest income

239

116

(108)

106.0%

-321.3%

Total noninterest income

1,358

1,366

786

-0.6%

72.8%

Noninterest expense:

Salaries and employee benefits

1,705

1,687

1,423

1.1%

19.8%

Operations expense

991

967

728

2.5%

36.1%

Data processing

318

288

262

10.4%

21.4%

Losses and expenses related to OREO

164

675

22

-75.7

645.5%

Other noninterest expense

391

399

393

-2.0%

-0.5%

Total noninterest expense

3,569

4,016

2,828

-11.1%

26.2%

Income before income taxes

1,681

1,167

868

44.0%

93.7%

Income tax expense

539

370

275

45.7%

96.0%

Net income

$ 1,142

$ 797

$ 593

43.3%

92.6%

PER COMMON SHARE DATA

(unaudited)

Basic earnings per share

$ 0.44

$ 0.31

$ 0.23

41.9%

100.0%

Diluted earnings per share

$ 0.43

$ 0.30

$ 0.23

43.3%

95.5%

Common shares outstanding at period-end

2,587,544

2,587,544

2,587,760

0.0%

0.0%

Book value per share

$ 17.58

$ 17.13

$ 11.61

2.6%

51.4%

Tangible book value per share

$ 17.31

$ 16.85

$ 11.29

2.7%

53.3%

KEY FINANCIAL RATIOS

(unaudited)

Annualized return on average equity

10.11%

7.24%

7.90%

39.6%

28.0%

Annualized return on average tangible equity

10.28%

7.36%

8.12%

39.7%

26.6%

Annualized return on average assets

1.14%

0.81%

0.68%

40.7%

67.6%

Net interest margin

4.68%

4.55%

5.24%

0.0%

-13.2%

Efficiency ratio

59.74%

61.49%

58.51%

-2.8%

2.1%

Quarter Ended:

Percent Change From:

CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

June 30,

December 31,

June 30,

(in $000's, unaudited)

2013

2012

2012

2012

2012

ASSETS

Cash and cash equivalents

$ 11,760

$ 12,727

$ 19,400

-7.6%

-39.4%

Securities available-for-sale, at fair value

16,965

22,900

9,033

-25.9%

87.8%

FHLB stock, at cost

2,357

2,401

2,444

-1.8%

-3.6%

Loans held-for-sale

2,078

1,725

1,053

-0.2%

97.3%

Loans:

One- to four- family residential

101,406

94,059

94,604

7.8%

7.2%

Home equity

35,055

35,364

38,175

-0.9%

-8.2%

Commercial and multifamily

149,157

133,620

111,804

11.6%

33.4%

Construction and land

38,409

25,458

20,564

50.9%

86.8%

Manufactured homes

14,682

16,232

17,463

-9.5%

-15.9%

Other consumer

9,265

8,650

9,861

7.1%

-6.0%

Commercial business

11,802

14,193

14,556

-16.8%

-18.9%

Total loans

359,776

327,576

307,027

9.8%

17.2%

Deferred loan (fees) costs, net

(1,117)

(832)

(633)

34.3%

76.5%

Total loans, including deferred fees and costs

358,659

326,744

306,394

9.8%

17.1%

Allowance for loan losses

(4,129)

(4,248)

(4,449)

-2.8%

-7.2%

Loans, net

354,530

322,496

301,945

9.9%

17.4%

Accrued interest receivable

1,333

1,280

1,234

4.1%

8.0%

Bank-owned life insurance

10,872

7,220

7,099

50.6%

53.1%

OREO and ORA, net

1,190

2,503

2,839

-52.5%

-58.1%

Mortgage servicing rights, at fair value

2,670

2,306

2,558

15.8%

4.4%

Premises and equipment, net

2,233

2,256

2,233

-1.0%

0.0%

Other assets

3,577

3,230

5,234

10.7%

-31.7%

Total assets

$ 409,565

$ 381,044

$ 355,072

7.5%

15.3%

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Demand deposit, noninterest-bearing

$ 33,970

$ 35,234

$ 36,123

-3.6%

-6.0%

Demand deposit, interest-bearing

27,966

28,540

25,765

-2.0%

8.4%

Savings and money market

113,388

113,323

114,797

0.1%

-1.2%

Time deposits

144,190

134,986

137,044

6.8%

5.2%

Total deposits

319,514

312,083

313,729

2.4%

1.8%

Borrowings

40,542

21,864

8,185

85.4

395.3%

Accrued interest payable and other liabilities

4,012

3,640

3,116

10.2%

28.8%

Total liabilities

364,068

337,587

325,030

7.8%

12.0%

Shareholders' Equity:

Common stock

26

26

30

0.0%

-13.3%

Paid-in capital

24,745

24,789

12,005

-0.2%

106.1%

Unearned shared – ESOP

(1,598)

(1,598)

(693)

0.0%

130.6%

Retained earnings

22,675

20,736

19,235

5.3%

17.9%

Accumulated other comprehensive loss

(351)

(496)

(535)

-22.3%

-34.4%

Total shareholders' equity

45,497

43,457

30,042

2.6%

51.4%

Total liabilities and shareholders' equity

$ 409,565

$ 381,044

$ 355,072

4.8%

15.3%

Quarter Ended:

Percent Change From:

June 30,

December 31,

June 30,

December 31,

June30,

2013

2012

2012

2012

2012

CREDIT QUALITY DATA

(in $000's, unaudited)

Nonaccrual loans

$ 1,481

$ 3,003

$ 3,830

-50.7%

-61.3%

Nonperforming restructured and loans over 90 days past due and on accrual